Seer Inc

IV. Key Componentsof our Compensation Program

The talent and compensation committee has developed an executive compensation program that consists of three main components. The relative mix of these components is weighted more on incentives, particularly long-term incentives, rather than fixed compensation. The focus on incentive compensation ensures that the interests of our executives are aligned with those of our stockholders. Our compensation program is made up of the following three key compensation components:

We design and implement an executive compensation program that combines both base salary, and short-term and long-term incentive elements based on annual performance objectives and long-term equity interests. The annual cash incentives and long-term equity awards elements of our executive compensation program are intended to align the interests of our executives and our shareholders. The talent and compensation committee has not, however, adopted any formal or informal policies or guidelines for allocating compensation between short-term and long-term compensation, between base salary and non-cash compensation, or among different forms of non-cash compensation.

Base Salaries

Base salary represents the fixed portion of our executives’ compensation, which we view as an important element to attract, retain and motivate highly talented executives. Each named executive officer’s base salary is typically annually reviewed by our talent and compensation committee based on competitive market considerations and level of responsibilities, experience, and skill set. These considerations are supplemented by market data provided by the talent and compensation committee’s independent compensation consultant. In February 2024, our talent and compensation committee reviewed these annual base salary amounts and provided merit increases to our named executive officers, effective March 1, 2024.

Based on these considerations, our named executive officer’s annual base salaries for 2024 were as follows:

Annual Cash Incentives

In addition to base salaries, our named executive officers are eligible to receive annual performance-based cash bonuses under our Executive Incentive Compensation Plan, which bonuses are designed to provide appropriate incentives to our executives to achieve defined annual corporate goals and to reward our executives and other employees who significantly impact our corporate results.

Annual corporate goals are developed and recommended by management to the Board of Directors. The Board of Directors approves the annual corporate goals. Annual corporate goals are reviewed by the talent and compensation committee on a quarterly basis to track the Company’s progress toward achievement of the annual corporate goals and the continued appropriateness of such goals throughout the year. For each named executive officer, our talent and compensation committee sets the target bonus as a percentage of base salary, each of which is set forth below for 2024:

Each year, our talent and compensation committee sets the goals that will apply to that year’s executive bonuses, and the weightings attributable to such goals. The actual performance-based bonus paid, if any, is calculated by multiplying the executive’s annual base salary and target bonus percentage times percentage achievement of the applicable goals. For 2024, named executive officer bonuses were 100% based on corporate objectives, in order to focus our named executive officers on our most critical and strategic goals for the year, and the corporate objectives were divided into four categories as specified below:

In general, corporate objectives are set at levels that were considered difficult to achieve, but achievable with significant effort, and if achieved at 100% would have exceeded the Company’s operational expectations for the measurement period.

At the close of the applicable fiscal year, the talent and compensation committee comes to a general, subjective conclusion as to whether the corporate goals overall were met, and whether there were any other factors that should be considered in determining the amount of bonus earned for the year. The talent and compensation committee may decide to pay bonuses to the named executive officers even if the specified performance goals are not met, in recognition of the Company’s performance throughout the year in meeting other objectives not contemplated at the beginning of the performance period, or alternatively may determine to decrease or eliminate bonuses even if goals are achieved after weighing factors such as those not specifically set at the beginning of the year. In making the final decision on the corporate goal achievement, the talent and compensation committee also considers the review of the year-end financial results. In sum, the amount of bonus compensation that is actually earned by our named executive officers may be influenced by subjective determinations by our talent and compensation committee. The talent and compensation committee believes that maintaining discretion to evaluate corporate performance at the close of the year based on the totality of the circumstances, and to award or fail to award bonus compensation without reliance on rote calculations under set formulas, is appropriate in responsibly discharging its duties, particularly for a Company at our growth stage. Our talent and compensation committee may award a bonus in an amount above or below the amount resulting from the calculation described above, based on other factors that our talent and compensation committee determines, in its sole discretion, are important to our corporate performance and provide appropriate incentives to our executives, for example based on events or circumstances that arise after the original goals are set. Payouts of earned bonuses, if any, are generally made in the year following the year of performance, and subject to the recipient’s continued employment with us through the payment date.

On February 5, 2025, the talent and compensation committee evaluated our achievement of the 2024 corporate objectives. The talent and compensation committee considered whether we had achieved specific goals in each category of our corporate objectives, including any over achievement in each category, the weighting established for each category, and our overall corporate performance in 2024. After taking into consideration performance against corporate objectives as well as successes on other key Company’s projects, the talent and compensation committee approved a 75% achievement level for our named executive officers for our 2024 corporate objectives.

Bonus payments made for 2024 performance were as follows:

(1) Ms. Kogan left the Company on July 26, 2024 and therefore she was not eligible for a bonus payment for the 2024 performance period.

Long-Term Incentives

Our focus on long-term value creation results in our executive compensation program having a strong weighting toward equity compensation. We rely heavily on equity compensation that vests over a multi-year period to ensure that a significant portion of a named executive officer’s compensation opportunity is related to factors that directly and indirectly influence stockholder value. Our talent and compensation committee believes this serves as a reward for appreciation in our stock price, and long-term value creation and enables us to achieve our retention objectives. Further, equity participation establishes a sense of ownership and more closely aligns executives’ interests with those of our other stockholders.

2024 Annual Equity Grants

In 2024, our annual equity awards to our executives were in the form of stock options with market performance conditions and restricted stock units with time-based vesting. Stock options with a market performance condition become eligible to vest only if the average of our closing price for each trading day over a consecutive 20-trading day period increases above the stock price on the date of grant by 200% for named executive officers other than our CEO and by 300% for our CEO, thereby further aligning company performance with stockholder interests. Furthermore, we believe that RSU awards provide tangible value to our executive officers and serve as an important incentive and retention tool during a difficult operating or volatile business environment, while still being tied to stockholder value. Additionally, RSU awards enable our executive officers to accumulate stock ownership in the Company.

We grant equity awards to our named executive officers as part of the talent and compensation committee’s annual review of executive compensation. The talent and compensation committee has not applied a rigid formula in determining the size of these equity awards or mix between options and RSUs. In February 2024, the talent and compensation committee reviewed and approved the option and RSU grants for the named executive officers, making its decision with input and assistance from Aon on a market assessment of peer companies, as well as by utilizing a blend of factors that included value of equity compensation and Company ownership. The talent and compensation committee determined that the annual equity grants would be split between stock options with a market performance condition and RSUs, with slightly greater emphasis on the market performance-based stock options based on value, as follows:

(1) The dollar amounts in this column represent the aggregate full grant date fair value of the equity awards calculated in accordance with FASB ASC Topic 718. Please see the Summary Compensation Table for more details regarding how this value is calculated.

(2) To more closely align our CEO’s interests with those of our stockholders, the talent and compensation committee added a market performance condition to the retention options granted to our CEO in 2024. The stock option will become eligible to vest only if the average closing price of our stock over a consecutive 20-trading day period increases to 300% (an average closing price of $5.31 over a consecutive 20-trading day period) of the price on the date of grant ($1.77). This option has a seven-year performance period. If the market conditions are not met by February 6, 2031, the option will be forfeited in its entirety. If the market conditions are met by such date, then one-fourth of the shares subject to the option vest on the date that such market condition achievement is certified and the remaining shares vest annually thereafter in three equal installments, subject to continued service to the Company.

(3)To more closely align our named executive officers' interests with those of our stockholders, the talent and compensation committee added a market performance condition to the options granted to our executive team in 2024. These stock options will begin to vest only if the average closing price of our stock over a consecutive 20-trading day period increases to 200% (an average closing price of $3.54 over a consecutive 20-trading day period) of the price on the date of grant ($1.77). These options have a seven-year performance period. If the market conditions are not met by February 6, 2031, the options will be forfeited in their entirety. If the market conditions are met by such date, then one-fourth of the shares subject to the option vest on the date that such market condition achievement is certified and the remaining shares vest annually thereafter in three equal installments, subject to continued service to the Company.

Retention Grants

The talent and compensation committee severely limits discretionary equity grants to rare cases, to be used judiciously and only in very limited circumstances. However, the talent and compensation committee views special equity awards as an important way to meet the Company’s needs for a specific purpose or during a specific period. Our ability to execute our strategy, our future success and the promotion and protection of the interest of our stockholders depend largely on our continuing ability to retain highly qualified and skilled executive leaders.

For several years, there has been fierce competition in the biotechnology industry for executive officers and employees with the skills and experience to lead others. This is especially true in the San Francisco Bay area, where there is an ongoing “war for talent.” Various factors, including inflation and the employment market have made the situation even more intense. Attracting and retaining executive talent of the caliber of our leaders is both extremely challenging and vitally important. Our ability to execute our strategy, our future success and the promotion and protection of the interests of our stockholders depend to a great extent on our continuing ability to retain highly qualified and skilled employees.

Against this backdrop, and with input and assistance from Aon, the talent and compensation committee determined in February 2024 that it was in the best interest of the Company and our stockholders to make certain supplemental grants to our named executive officers as follows:

(1) The dollar amounts in this column represent the aggregate full grant date fair value of the equity awards calculated in accordance with FASB ASC Topic 718. Please see the Summary Compensation Table for more details regarding how this value is calculated.

(2) To more closely align our CEO’s interests with those of our stockholders, the talent and compensation committee added a market performance condition to the retention options granted to our CEO in 2024. The stock option will become eligible to vest only if the average closing price of our stock over a consecutive 20-trading day period increases to 300% (an average closing price of $5.31 over a consecutive 20-trading day period) of the price on the date of grant ($1.77). This option has a seven-year performance period. If the market conditions are not met by February 6, 2031, the option will be forfeited in its entirety. If the market conditions are met by such date, then one-fourth of the shares subject to the option vest on the date that such market condition achievement is certified and the remaining shares vest annually thereafter in three equal installments, subject to continued service to the Company.

(3)The stock option vests as to one-fourth of the shares on February 6, 2025 and as to one forty-eighth of the shares monthly thereafter, subject to continued service to the Company.

We believe that the multi-year vesting requirements applicable to both stock options and RSUs encourage employee retention. The 2024 RSUs grants to our named executive officers are scheduled to vest annually over a four-year period. In order for our 2024 annual option grants and our 2024 retention option grants to our named executive officers to be eligible to vest, the average closing price of our stock over a consecutive 20-trading day period is required to grow to 200% (300% for our CEO) of the fair market value on the date of grant (that is, to an average closing price of $3.54 ($5.31 for our CEO) for 20 consecutive trading days from the exercise price of $1.77 per share). Upon the achievement of that stock price goal, one quarter of the 2024 option grants immediately vest and then the remainder vest in equal annual installments over a subsequent three-year period. Both types of equity awards are subject to the executive’s continuing service on each vesting date and to the vesting acceleration provisions of the company’s key executive change in control and severance plan (the Severance Plan) or, with respect to our CEO, his change in control and severance agreement (the Severance Agreement), as discussed further above. In order to encourage a successful change in control that is in the best interests of our stockholders and avoid causing the named executive officers distraction based on the possibility of their termination in connection with a change in control, the performance-based stock options provide that if we undergo a change in control, the achievement of this stock price target is determined based on the change in control price. If the stock price target is achieved in the change in control, the time-based vesting requirements otherwise applicable to these options are waived, and the options vest in full, as long as the named executive remains in service to us as of immediately prior to the completion of the change in control. For our CEO only, if, during the three months prior to a change in control, his employment with us is involuntarily terminated (within the meaning of his Severance Agreement), then his performance-based stock option will remain outstanding and eligible to achieve the stock price goal based on the change in control price and, if it is achieved, the option will be considered to be a time-based award for purposes of his Severance Agreement and will vest in full. This is consistent with the change in control-related acceleration of vesting provisions that apply to our CEO’s time-based equity awards under his Severance Agreement.

2024 Modification of Equity Grants

On October 4, 2024 (the Effective Date), the Board approved an option repricing. The repricing applied to nonstatutory stock options to purchase shares of the Company’s Class A common stock that (i) were granted to employees, including our named executive officers (other than Ms. Kogan who resigned earlier in the year), under the Company’s 2020 Plan or the 2017 Plan (together with the 2020 Plan, the Plans) and applicable award agreements thereunder; (ii) as of the Effective Date, were held by continuing employees; and (iii) had an exercise price per share greater than $2.00. The repriced options for our named executive officers were as follows:

The new exercise price for repriced options is $2.00 per share, the closing price of the Company’s Class A common stock on the Effective Date. However, if an employee exercises a repriced option before the end of the Retention Period, the period that begins on the Effective Date and ends on the earliest of the following: (i) April 4, 2026; (ii) a Change in Control (as defined in the 2020 Plan); and (iii) the optionholder’s death or Disability (as defined in the 2020 Plan), such employee will be required to pay a premium exercise price that is equal to the original exercise price per share of such repriced option.

In addition, certain option awards granted in 2023 with market conditions were amended to have an exercise price of $2.00 and stock price hurdle amount of $3.00 per share. Such amendment applied to such performance-based stock option award granted to Dr. Farokhzad to purchase 650,000 shares and to Mr. Horn to purchase 140,000 shares. There was no change to the expiration dates or service-based vesting criteria, or number of shares, and such options remain subject to the terms of the applicable Plans and award agreements.

As part of the repricing, the Board determined not to make any additional awards in 2025 to executive officers of the Company with the title Senior Vice President and higher.

Stock options have historically been a critical component of our executive compensation program. Our emphasis on stock options is consistent with our peer companies and intended to link executive pay to stockholder return, motivate our named executive officers’ performance toward our long-term success and encourage our executive officers to continue their employment with us.

During the past few years, the price of our common stock has significantly decreased. A substantial portion of the stock options held by our employees (including our named executive officers) were “underwater,” with exercise prices well above the then-current market price of our common stock. As a result, the Board believed these stock options had little or no perceived value to our employees and therefore were no longer effective as incentives to motivate and retain these individuals. In response, the Board approved the option repricing.

The Board approved the repricing after multiple meetings, careful consideration of various alternatives and a review of other applicable factors and with the advice of our independent compensation consultant, Aon. The Board believed that the repricing was critical to our future success to revitalize the incentive value of our outstanding stock options to retain and motivate our employees. When considering alternatives to a repricing, the Board considered, among other alternatives, cash-based retention vehicles and/or supplemental equity compensation. The Board determined the repricing program was preferable for a variety reasons, including because it avoided significant additional cash expenditures (to devote more of our cash resources towards advancing our product development objectives) and it avoided the increased stock dilution that would result from a significant number of new supplemental equity grants. The Board designed the program with the terms set forth below that it felt were important from a retention and governance perspective:

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Each of our named executive officers held options eligible for the repricing.

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There were no changes to the number of shares underlying the repriced options or to the vesting schedules or expiration dates of the options.

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We treated the repricing as a modification of the original stock options and calculated additional compensation costs under ASC Topic 718 for the difference between the fair value of the modified award and the fair value of the original award on the Effective Date. The repricing resulted in incremental stock-based compensation cost under ASC Topic 718, including as reported in the “Summary Compensation Table” for our named executive officers.